The outbreak of violence in the Middle East was a troubling development this week, with possible supply chain implications in the near future if the situation worsens. Let’s hope the political leaders on all sides can diffuse this situation quickly and without additional violence.

As you can see in the chart below, the Freight TSI index has remained relatively flat this year. The index rose 0.1 percent in July from June, and was up 1.9 percent from July 2011. Here’s the analysis from the press release: “The Freight TSI in July 2012 continued a pattern of little change since January. This appears to reflect the rate of growth in the general economy. Gross Domestic Product (GDP) growth slowed to a revised 1.7 percent in the second quarter and a revised 2.0 percent in first quarter of 2012, from 3.0 percent in fourth quarter of 2011, according to the Bureau of Economic Analysis (BEA).”

Despite the weak growth in freight activity, driver turnover at trucking companies is increasing. According to American Trucking Associations’ quarterly Trucking Activity Report, “the annualized turnover rate for linehaul truckload fleets of all sizes surged in the second quarter with turnover at large fleets breaking the 100% barrier for the first time in more than four years [emphasis mine].” Here are some comments from ATA Chief Economist Bob Costello:

“We continue to see steady, albeit sluggish, growth in freight volumes, which increases demand for drivers. That, coupled with continued pressure on fleets to improve their safety records as a result of regulatory oversight changes, is increasing competition among carriers for drivers with clean histories.

“We have been contending that the driver shortage is by and large qualitative, rather than quantitative. Despite some estimates, I believe that in terms of raw numbers, the trucking industry is currently short somewhere in the range of 20,000 to 30,000 drivers. However, if we continue to see growth in freight volumes, we can expect that number to rise in the near future, exacerbating the qualitative shortage and creating a quantitative one.”

With diesel prices up for the 10th straight week and driver turnover on the rise, you should expect some upward pressure on transportation costs in the weeks ahead.

On the technology front, SAP announced the general availability of the SAP® Enterprise Performance Management OnDemand (SAP EPM OnDemand) solution. According to the press release, the first options for SAP EPM OnDemand deliver:

Expense insight: Department managers can understand the details of anything charged to their cost centers, and can dispute and resolve miscoded, incorrect or duplicate expenses.

Real-time profit and loss (P&L) analysis: P&L reporting can be delivered at any level of detail by allocating costs based on consumption of resources.

Capital project planning: Both non-financial decision-makers and financial experts can establish the complete picture of the financial consequences of capital investment projects, and optimize the use of capital.

Meanwhile, Kewill launched version 5.0 of its Kewill Trade solution, “which manages the direct despatch of goods from supplier to customer or store, for multi-channel, catalogue and internet retailers.” According to the press release, Kewill Trade enables “the electronic exchange of order data and documentation and automates the direct despatch process, giving retailers full visibility of orders fulfilled by direct despatch suppliers. It is scalable up to many thousands of trading partners and provides a simple to use, hosted ‘portal’ solution, additionally offering integration with financials and self-billing for higher volume suppliers.”

Finally, China has given FedEx and UPS approval to provide package-delivery services within the country. FedEx was granted rights to serve eight cities (Shanghai, Guangzhou, Shenzhen, Hangzhou, Tianjin, Dalian, Zhengzhou and Chengdu), while UPS was given rights to five cities (Shanghai, Guangzhou, Shenzhen, Tianjin and Xi’an). FedEx currently serves more than 400 cities in China, but via partnerships. While the approval fell short of expectations, it’s another step toward the full opening of the Chinese market to foreign logistics service providers.

Have a great weekend!

Song of the Week: “People are People” by Depeche Mode. “I can’t understand what makes a man hate another man, help me understand.”